Correlation Between BMO MSCI and CI Canada

Can any of the company-specific risk be diversified away by investing in both BMO MSCI and CI Canada at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining BMO MSCI and CI Canada into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between BMO MSCI USA and CI Canada Quality, you can compare the effects of market volatilities on BMO MSCI and CI Canada and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in BMO MSCI with a short position of CI Canada. Check out your portfolio center. Please also check ongoing floating volatility patterns of BMO MSCI and CI Canada.

Diversification Opportunities for BMO MSCI and CI Canada

0.87

Correlation Coefficient

BMO MSCI  CI Canada

Very poor diversification

The 3 months correlation between BMO and DGRC is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding BMO MSCI USA and CI Canada Quality in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CI Canada Quality and BMO MSCI is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on BMO MSCI USA are associated (or correlated) with CI Canada. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CI Canada Quality has no effect on the direction of BMO MSCI i.e., BMO MSCI and CI Canada go up and down completely randomly.

Pair Corralation between BMO MSCI and CI Canada

Assuming the 90 days trading horizon BMO MSCI USA is expected to generate 1.9 times more return on investment than CI Canada. However, BMO MSCI is 1.9 times more volatile than CI Canada Quality. It trades about 0.27 of its potential returns per unit of risk. CI Canada Quality is currently generating about 0.36 per unit of risk. If you would invest  7,623  in BMO MSCI USA on April 20, 2025 and sell it today you would earn a total of  1,255  from holding BMO MSCI USA or generate 16.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

BMO MSCI USA  vs.  CI Canada Quality

BMO MSCI USA

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BMO MSCI USA are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, BMO MSCI displayed solid returns over the last few months and may actually be approaching a breakup point.

CI Canada Quality

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in CI Canada Quality are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, CI Canada may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Pair Trading with BMO MSCI and CI Canada

The main advantage of trading using opposite BMO MSCI and CI Canada positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BMO MSCI position performs unexpectedly, CI Canada can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in CI Canada will offset losses from the drop in CI Canada's long position.

The idea behind BMO MSCI USA and CI Canada Quality pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Transaction History module to view history of all your transactions and understand their impact on performance.